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Within term loans, which account for 62.8% of total bank credit, 80.2% are now priced below 10%.
With lending rates declining faster than deposit rates, banks’ net interest margins are coming under pressure, which could weigh on profitability in the coming quarters, according to experts.
Data showed that bank credit grew by 14.1% year-on-year as of end-March 2026, up from 11.1% a year ago. Double-digit credit growth was sustained across rural, semi-urban, urban and metropolitan areas, with metropolitan branches accounting for the largest share at 58.2% of total lending.
Public sector banks retained their dominance with a 52.9% share of total credit, followed by private sector banks at 39.4%.
Private sector banks accelerated sharply, with credit growth rising to 12.3% from 9.5% a year earlier, while public sector banks grew faster than the headline system rate.Also Read: Indian Banks poised for double-digit corporate credit growth on infra, energy, data centre push
Loans to the private corporate sector-accounting for more than a quarter of total bank credit-grew by 15.5% year-on-year, up from 11.9% a year ago. Agriculture and industrial credit also saw strong acceleration, growing by 14.4% and 12.0%, respectively, up from 8.1% and 9.4% in the previous year.
Personal loan growth moderated to 12.9% year-on-year-falling below overall credit growth for the first time after consistently outpacing it over the last few years. Despite the moderation, personal loans still account for 30.7% of total bank credit, according to RBI data.
The household sector remains the engine of credit growth, with borrowings rising by 14.3% year-on-year to account for 58.6% of total bank credit-and approximately three-fifths of all incremental credit extended during FY26.